Portuguese development bank should give public guarantees insists Euronext
The President of Euronext Lisbon believes that Portugal’s new Government-backed development bank Banco Português de Fomento (BPF) which begins operations in November, must put up State guarantees to back up the issue of bonds.
In an interview with the online news source ECO, Isabel Ucha admits that the new bank could be useful in helping boost the financing of Portuguese companies operating in the capital markets.
But she calls on the Government to ensure that the new institution complements the work of the private investment banking sector (namely with smaller-sized companies, and gives public guarantees to back the issue of bonds.
“The Banco de Fomento should be a strategic pillar dedicated to the promotion and development of the capital markets, not necessarily for activities that are in competition with the private investment banking sector, but for activities that are complementary to it and whereby the private investment banking sector is not so actively involved because these are less profitable ventures or because there is not quite so much appetite because of the business model,” says Isabel Ucha.
The same idea is shared by the Organisation for Economic Cooperation and Development (OECD) which has drawn up a list of 20 recommendations to boost the Portuguese capital market after having carried out a diagnostic study over one year in partnership with the Portuguese stock market regulatory commission (CMVM) and on the request of the Ministry of Finance.
In the document which was presented at the beginning of the month, the OECD suggests the institutionalisation of the Portuguese Enterprise Circle regarding the Banco de Fomento to assist in setting up, training and crystallisation, as well as suggesting that the bank should provide research, services, subscription and market maker for smaller companies that do not have the capacity to access larger financial institutions against a backdrop where there is a dearth of such services.
The president of the stock market agrees that more research coverage would be useful for smaller companies and also that at the level of mobilisation, training and setting up, the development bank could play and important role”.
“A third aspect at the level of mutual guarantees in the issue of bonds” is another example suggested by Isabel Ucha.
“The Government, through its National System of Mutual Guarantee – has earmarked very high amounts of emergency credit guarantees which are being channelled to companies, which is very important within the current context of the times were are living in, but it would also be useful if we could start to also count on similar guarantees for smaller companies and even perhaps aimed at some specific sectors which need stronger support, such as tourism, for example — for the bond issues,” she said.